Why India lost US GSP benefits

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Amitendu Palit
The US has terminated GSP benefits for India in spite of both countries engaging extensively on trade in recent months. The new US criteria for eligibility would have made India’s continuation as a beneficiary highly unlikely. The US’ frustration over some of India’s restrictive policies, like in e-commerce, also ensured this outcome. A bilateral trade package, while not impossible, will need major concessions by India and is not feasible before elections. The US is terminating benefits extended to India under the Generalized Systems of Preferences (GSP) programme as announced on 4 March 2019. The GSP allows more than 3,500 exports, from 121 developing countries and territories, duty-free access in the US market. 

Indian exports have benefitted the most from the US GSP, among all eligible developing countries. Around US$5.7 billion (S$ 7.7 billion) of exports by India to the US in 2017 were under the GSP, amounting to 13 per cent of total Indian exports to the US. Though the proportion was less than the 21.5 per cent for Turkey – another major beneficiary of US GSP whose preferences were withdrawn along with India’s – it was more than the 10.7 per cent for Indonesia, whose GSP eligibility is under review. Scrapping GSP benefits for India was not entirely unexpected. The US is reviewing several GSP beneficiaries with the initial reviews focusing on Asian countries. India, along with Indonesia and Kazakhstan, were chosen for review in April 2018. Turkey’s review commenced in August 2018.

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